Secretary Harriet Harman, supported by the Prime Minister, Mr. Chancellor of the Exchequer, Secretary Jack Straw, Secretary Alan Johnson, Secretary Hazel Blears, Secretary Geoff Hoon, Secretary Ed Balls, Secretary James Purnell, the Solicitor-General, Mr. Pat McFadden and Maria Eagle, presented a Bill to make provision to require Ministers of the Crown and others when making strategic decisions about the exercise of their functions to have regard to the desirability of reducing socio-economic inequalities; to reform and harmonise equality law and restate the greater part of the enactments relating to discrimination and harassment related to certain personal characteristics; to enable certain employers to be required to publish information about the differences in pay between male and female employees; to prohibit victimisation in certain circumstances; to require the exercise of certain functions to be with regard to the need to eliminate discrimination and other prohibited conduct; to enable duties to be imposed in relation to the exercise of public procurement functions; to increase equality of opportunity; and for connected purposes.
I wish to begin by thanking my right hon. Friends the Members for Islwyn (Mr. Touhig) and for Cardiff, South and Penarth (Alun Michael), my hon. Friends the Members for West Bromwich, West (Mr. Bailey), for Edinburgh, North and Leith (Mark Lazarowicz), for Plymouth, Sutton (Linda Gilroy), for Loughborough (Mr. Reed) and for Sheffield, Heeley (Meg Munn), and the hon. Members for Twickenham (Dr. Cable), for Buckingham (John Bercow) and for Bournemouth, West (Sir John Butterfill) for supporting the Bill. I also wish to record my thanks to officials from the Treasury for their technical support, and to Michael Stephenson and colleagues from the Co-operative party.
Let me place todays debate in contexthistorical, contemporary and future. Much debate in this House over many decades has been about the respective merits or demerits of private enterprise, as opposed to public ownership or public service. Yet there is, of course, a formidable third sectorI hesitate to use the term third waybased on ideals of mutuality or co-operation.
The early ideal and the practice of co-operation more than two centuries ago was a product of its time, the backdrop being industrialisation and urbanisation with the gross exploitation of men and women during that period of rapid economic and social change. Living standards were threatened for those on modest incomes. As young Beatrice Potter, later Mrs. Sidney Webb, wrote in her first book about the co-op movement:
The belief in a co-operative system of industry arose in the untutored mind of Robert Owen and, doubtless, in the minds of other English men, as they watched the doings of the stupendous revolution in industry and commerce which engrossed the energies, stimulated and governed the activity of the middle- and working-class from 1770 onwards.
Robert Owen is, of course, a key figure, but many have traced the origins of co-operation or mutuality to a much earlier history. Indeed, there is even a reference that in 203 AD [ Interruption. ] Given his chuckle, my hon. Friend the Member for Brighton, Pavilion (David Lepper) obviously recalls the reference. In 203 AD, the Romans had mutual insurance societies to provide for death and retirement, so giving an early answer to the Pythonesque question of What did the Romans ever do for us?
After a long period of slumber and decline, co-operatives and mutuals are experiencing a renaissance. It could hardly be more timely. With the mainstream banking sector in some disrepute, customers seek a reliable and honest home for their money. With many people looking for ethical alternatives, goods that are fairly traded and produced sustainably make co-ops, both large and small, attractive. Some are also attracted to the idea of what we used to refer to as the divi, which is not a daily allowance, but an annual one.
Co-ops, mutuals and credit unions are already significant players in the British economy, with total assets in excess of £400 billion and a combined membership of more than 30 million, but now we have the opportunity
for a substantial expansion and, in the finance sector, for an alternative both to market structures and to nationalisation.
Renewal is evidenced by three recent significant developments. The Co-operative Retail Society has now combined into one entity, bringing together many separate retail societies and around 2,200 stores. Secondly, the new unified Co-op is taking over more than 800 Somerfield retail stores, which will mean a combined market share of 8 per cent. To serenade the revival, Bob Dylan has allowed Blowin in the Wind to be used as the soundtrack to a new Co-op advertising campaignI note that the great man is bringing out a new album. Thirdly, the Co-operative bank and the Britannia building society have announced plans for a mergera new £70 billion super-mutual bank.
It is therefore my pleasure to introduce this Bill for its Second reading. The Bill traces its beginnings to a Government consultation of 2007, which reviewed the legislation for credit unions and co-operatives in Great Britain. Responses to that consultation indicated an overall desire to update the legislation for credit unions and co-ops. Although there have been legislative changes in recent years, the bulk of credit union legislation had not been updated for almost 30 years and much of the legislation for co-ops, as embodied in the Industrial and Provident Society Act 1965, was itself a consolidation of 19th-century legislation. The Governments response to the initial consultation was equally emphatic and signalled a desire to legislate.
The consultation identified some 30 or so issues for both credit unions and industrial and provident societies that needed to be addressed in order to bring the legislation in line with international comparators and to meet the commercial realities of the 21st century. The Government plan to take forward the majority of the proposed reforms using a legislative reform order, but there are still some residual issues that can be addressed only through primary legislation, hence this private Members Bill.
Before I go on to introduce the detailed content of the Bill, I want briefly to highlight the important role that credit unions and co-ops play in todays society and economy. Credit unions and co-operatives, as mutual societies, are inherently different from proprietary companies. They belong to their members and are not answerable to external shareholders. They are therefore able to operate on longer-term planning horizons without pressure for short-term profit or gain. That ethos is even more important in the current economic climate.
Credit unions in Great Britain not only provide for greater choice and diversity in the economy but offer many people on low incomes an opportunity to engage with mainstream financial services. They encourage their members to save in order to become eligible for loans, thereby instilling a savings culture among thema culture of thrift and caution that must be admired. I witnessed that good work myself on Monday evening, when I was asked to speak about the Bill at the annual general meeting of the Croydon Savers credit union. That credit union has more than 1,000 members and plays a valuable role in my constituency. Perhaps I should declare a potential interest in that, encouraged by the excellent work of my local credit union, I have decided to become a member. I hope in the initial
months to be a saver member, but I never take elections for granted and there is always a possibility that the saving-borrowing situation could change in the future.
Credit unions have also been prolific in supporting savings initiatives such as child trust funds and individual savings accounts. They have historically operated in areas of economic and social deprivation, often being the only means of engagement with the financial system for many who have been financially excluded. They offer an affordable alternative to unscrupulous doorstep lenders, some of whom have been known to charge annual percentage rates that exceed 200 per cent., contributing to increasing debt and misery for thousands of families.
Credit unions are the decent alternative to both the high street banks, which often, sadly, offer little to low-income groups, and the foul loan sharks, charging extortionate interest rates, who stalk single mothers in our most deprived communities. Today there are more than 500 credit unions in Great Britain with nearly 700,000 members and assets in excess of £500 million. From its humble beginnings, the credit union sector has grown from strength to strength.
The contribution of co-operative enterprise to the UK economy is well documented. Co-operative enterprise is at the forefront of responsible business practice including fair trade, ethical policies based on customers concerns and corporate social responsibility, as well as significant community sponsorship. Co-operatives are also leading innovation in many sectors; Braille on packaging is just one example.
Alun Michael (Cardiff, South and Penarth) (Lab/Co-op): The way in which my right hon. Friend is tracing the renaissance of the traditional concept of fairness and mutual benefit is compelling. Does he agree that his Bill does more than merely bring a traditional model up to date? It makes that model an ideal option for the internet age and for the types of modern businesses and communications that are playing an increasing part in our society today.
Malcolm Wicks: I agree. I have talked about the co-ops leading on much innovation, and internet business is one example of that and is of great help to many families who have internet access and want to use co-operative and ethical alternatives.
Co-operative enterprises have a distinct community focus, engineering social cohesion and fostering local entrepreneurship. They straddle a wide range of businesses from cottage industries to large enterprises such as the Co-operative Group. Co-operative enterprise continues to grow and there are now more than 8,000 co-operatives registered in Great Britain as industrial and provident societies. As we have seen that is a long and honourable tradition on which we can build.
The recent economic downturn has cast a shadow over much of the financial services sector, yet in all this co-operatives and credit unions continue to persevere and, indeed, to thrive. I want to see a revitalised and self-sustaining co-operative and credit union sector, attracting a new generation of members and offering much needed services to its members. The Bill complements other planned legislative changes that the Government are carrying out. It will allow the sector to expand and
place it in a better position to operate in todays competitive economic environment. The Bill will also ensure that important corporate governance improvements can be made to credit union and co-operatives legislation.
There is a distinguished tradition of private Members Bills for the mutuals sector. Examples abound and include those promoted by my hon. Friend the Member for Harrow, West (Mr. Thomas), who I see in his place, by my hon. Friend the Member for South Derbyshire (Mr. Todd) and, more recently, by the hon. Member for Bournemouth, West, who is one of the sponsors of this Bill.
My hon. Friend the Member for Harrow, West created an enabling power for the Treasury to amend industrial and provident society legislation using secondary legislation in line with any changes to company law. My hon. Friend the Member for South Derbyshire introduced an important power to enable the Treasury to lay secondary legislation to introduce an asset lock for community benefit societies. The asset lock is designed to ensure that on a break-up of an industrial and provident society, assets are not distributed to individuals but are transferred to a society with similar ideals. The hon. Member for Bournemouth, West introduced important changes to building society legislation and facilitated the transfer of a mutual business to another in the mutual family as an alternative to demutualisation. The recent announcement of the proposed merger between the Co-op Group, including its bank, and Britannia building society was made possible by his important legislation.
Mr. Andrew Love (Edmonton) (Lab/Co-op): May I remind my right hon. Friend that that honourable tradition of private Members legislation goes back even further? In the late 70s, the legislation that set up worker co-operatives was also a private Members Bill.
I shall now turn to the provisions of the Bill, although not in too much detail. It is aimed at modernising the legislative framework for credit unions and co-operatives. I am pleased to inform hon. Members that in addition to making provision for credit unions, this Bill makes provision for co-operatives run for the benefit of their members and co-operatives that are run for the benefit of the communityI am advised that these are often referred to as bencoms. Indeed, Treasury lawyers wanted me to say, Or bencoms, as they are popularly known. That is a popularity not known on the streets of Croydon, North, but it just goes to show that what is popular in the Treasury in not always popular elsewhere. During Budget week, I should not have said thatstrike it from the minutes!
These bencoms have increased in popularity since their inception in 2002 and many housing associations, social clubs and football and rugby supporters clubs now use the model incorporating an asset lock. Clause 1 provides that all new societies registered under the 1965 Act may be registered as co-operative societies or community benefit societies. Most co-operatives are registered under the 1965 Act. However, while many would agree that co-operatives are indeed industrious, it is a bit of a misnomer to refer to all of them as industrial. There is, of course, the exception of agricultural co-operatives. As for the word provident in the Act,
some might argue that it makes the societies sound like institutions of a bygone age, although we hope that they will be provident and prudent in future.
By modernising the name to one that is in common usage, we can help the sector to adopt a modern, 21st-century persona. The introduction of a requirement for new societies to register will also ensure that they can be properly supervised by the Financial Services Authority; that would improve corporate governance in the sector. Clause 2 changes the name of the Industrial and Provident Societies Act 1965 and other Industrial and Provident Societies Acts, and goes a long way towards removing the term industrial and provident societies from the statute book.
Clause 3 applies the Company Directors Disqualification Act 1986 to officers of industrial and provident societies, just as it applies to officers of companies, building societies and friendly societies. The 1986 Act provides for the disqualification of officers of companies and various bodies when such officers have seriously mismanaged them. Disqualification means being prohibited for a period from being involved in the management of a company or acting as an insolvency practitioner. Under the law as it currently stands, officers of industrial and provident societies who have mismanaged the society cannot be disqualified. Clause 3 will make their disqualification possible. That will ensure that officers of industrial and provident societies are subject to appropriate sanctions similar to those faced by directors of companies. It will give reassurance to their members and serve as a useful incentive for sound management practices.
Clause 4 gives the Treasury powers to apply to industrial and provident societies certain provisions of company lawon dissolution and restoration of industrial and provident societies to the register, which is kept by the FSA; on investigation of companies; and on company names. It will give the Treasury the power to apply company law on the striking-off and dissolution of defunct societies by the FSA. The provisions include appropriate modifications for co-operatives, so that in the event of dissolution their assets can be transferred to a society with similar objects. That will serve to improve the power of the FSA to deal with societies that remain on the register but have no contact with the FSA. I understand that a number of societies neither file returns nor respond to correspondence.
The law as it stands does not provide the FSA with the tools that it needs properly to deal with the problem and existing procedures for removing defunct societies are cumbersome. The provisions in the Bill will lead to a neater, clearer, quicker and more formal tool to cancel the registration of such societies. Clause 4 will also give the Treasury the power to enhance the FSAs power to investigate companies and requisition documents from industrial and provident societies. The FSA is the registrar of industrial and provident societies in the same way that Companies House, an executive agency of the Department for Business, Enterprise and Regulatory Reform, is the registrar of companies.
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